On 20 March 2020, the European Data Protection Board (“EDPB”) released a statement on the protection of personal data in connection with measures that public authorities and business organizations (including employers) are taking to address the Coronavirus (COVID-19) pandemic. This statement is an extension of the statement released by the EDPB chair on 16 March 2020, (which can be accessed here). In its latest statement, the EDPB emphasises that EU data protection law (in particular, the EU General Data Protection Regulation (“GDPR”)) does not stand in the way of measures adopted to fight against COVID-19 – if these measures are necessary, proportionate and consistent with safeguards required under EU Member State laws. The EDPB statement also provides useful guidance for organisations to consider when adopting measures to lawfully process personal data during this time.
Overall, while EDPB statement may provide some reassurance to organizations with respect to COVID-19 measures, organizations will be advised to consider guidance issued by specific EU Member State data protection authorities as well. In particular, specific EU Member State data protection authorities have begun issuing COVID-19 guidance that is, at least in certain respects divergent: while certain data protection authorities are adopting a more restrictive approach (for example, the French CNIL), others are more permissible (for example, the UK’s Information Commissioner’s Office).
On March 5, 2020, the Office of the Comptroller of the Currency (OCC) issued an updated set of answers to frequently asked questions (FAQs)1 regarding risk management in national bank relationships with third parties to further supplement its 2013 guidance, OCC Bulletin 2013-29 (the Bulletin),2 and its 2017 FAQs (Prior FAQs) on the topic.3 Twelve of the 27 FAQs are new and elaborate on a wide range of topics, including the broad intended scope of third-party risk management obligations, obligations of banks where negotiating power or access to information is limited, oversight of cloud computing providers and data aggregators and use of third parties in model development or delivery of alternative data for credit underwriting.
This week the U.S. Department of Health and Human Services (HHS) took action to waive penalties and refrain from enforcing certain federal health information privacy restrictions under the Health Insurance Portability and Accountability Act (HIPAA) in response to COVID-19.
The U.S. Securities and Exchange Commission’s (SEC) Office of Compliance Inspections and Examinations (OCIE) and the Financial Industry Regulatory Authority (FINRA) recently published their examination priorities (together, the Examination Priorities) for the 2020 calendar year.1 In general, the 2020 Examination Priorities continue recurring themes from recent prior years.
OCIE’s 2020 Examination Priorities for broker-dealers and investment advisers include the protection of retail investors (including compliance with new standard of care requirements and interpretations), cyber and information security risks, anti-money laundering compliance, firms engaging in the digital asset space and the provision of electronic investment advice.
FINRA’s 2020 Examination Priorities for member firms include those generally identified by OCIE for registered broker-dealers, as well as cash management and bank sweep programs, initial public offerings, liquidity management, trading authorizations and order routing and vendor display rule requirements, among others.
This Sidley Update summarizes selected aspects of the Examination Priorities that may be of particular interest to broker-dealers and investment advisers. As always, firms should use the 2020 Examination Priorities to review their compliance and supervisory procedures carefully and make any necessary revisions. Firms also should be prepared to explain their compliance and supervisory policies in these areas in their upcoming SEC and/or FINRA examinations, as applicable, and provide documentation of relevant reviews.
Just as companies were starting to recover from their exertions to put in place California Consumer Privacy Act (“CCPA”) compliance programs before the law’s January 1, 2020 entry into force, the California Attorney General (“AG”) provided an early February surprise. CCPA watchers long expected that the AG would revise the CCPA regulations he initially proposed on October 10, 2019. But when the AG actually released his proposed regulations on February 7 – a proposal he subsequently modified slightly on February 10 – both the timing and breadth of the revisions were surprising. In short, the revisions were both sooner and more significant than expected.
The U.S. Securities and Exchange Commission’s Office of Compliance Inspections and Examinations (OCIE) released a report on Cybersecurity and Resiliency Observations based on practices seen in prior exams. OCIE published the overview of practices to help market participants when considering “how to enhance cybersecurity preparedness and operational resiliency,” while acknowledging that there is not a “one-size fits all” approach. The report links cybersecurity to resiliency and business continuity planning, explicitly merging two concepts on which the OCIE has previously focused into a single topic.
With issues around the collection and handling of personal data becoming the focus of increased scrutiny among regulators, policymakers, and consumers, interest has continued to grow among organizations to better understand and address privacy risk. Seeking to support innovation in the market and to accommodate the increasingly global nature of data processing ecosystems, the National Institute of Standards and Technology (“NIST”) released Version 1.0 of the NIST Privacy Framework: A Tool for Improving Privacy through Enterprise Risk Management (“NIST Privacy Framework”) on January 16, 2020. The recent publication aims to outline an adaptable approach to privacy risk for organizations of all sizes by providing a “framework for privacy management, not just a checklist of tasks.”
The NIST Privacy Framework is a voluntary tool intended to assist organizations in managing privacy risks that may arise due to system, product, or service operations that involve personal data, or in connection to new regulatory regimes such as the California Consumer Privacy Act (“CCPA”) and the European Union’s General Data Protection Regulation (“GDPR”). As noted in the Executive Summary, the NIST Privacy Framework is intended to “enable better privacy engineering practices that support privacy by design concepts and help organizations protect individuals’ privacy.” Notably, the Federal Trade Commission (“FTC”), recognized by many as the U.S. government’s top privacy watchdog, had applauded the preliminary draft of the NIST Privacy Framework in Fall 2019 – indicating that the finalized publication could potentially serve as a credible benchmark for organizations seeking to address privacy risk across the data processing lifecycle.
On January 13, 2020, the U.S. Department of the Treasury (Treasury) issued final and interim regulations implementing the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), which expands the jurisdiction of the Committee on Foreign Investment in the United States (CFIUS) to review foreign investments and mitigate any potential national security concerns. While the final regulations largely track the proposed regulations issued on September 17, 2019, Treasury has made refinements and added several clarifying examples. See Sidley’s previous Update on the proposed regulations.
Following the structure of the proposed regulations, the final regulations were issued in two parts: one part covers investments in real estate, available here, while the other covers certain other investments in U.S. businesses, available here. Treasury simultaneously released a number of frequently asked questions on the proposed regulations, available here, and a fact sheet, available here.
The final CFIUS regulations will go into effect on February 13, 2020.
The California Department of Business Oversight (CDBO) recently concluded that the point of sale consumer financing programs offered by Sezzle, Inc., and another, unnamed party constituted making loans for purposes of the California Financing Law (CFL). A number of payment providers and technology companies have been developing innovative payment options, including consumer financing options, that are facilitated by advances in technology and mobile connectivity. Some market participants have structured their products such that a license should generally not be required under state law. The CDBO’s actions, however, may require companies to revisit that analysis and consider their licensing obligations.